Bush Administration Proposes Changes to U.S. Financial System; Interview With Former New York Governor Mario Cuomo

Aired March 31, 2008 - 18:00 ET

THIS IS A RUSH TRANSCRIPT. THIS COPY MAY NOT BE IN ITS FINAL FORM AND MAY BE UPDATED.

JOHN KING, CNN ANCHOR: I'm John King. You're in THE SITUATION ROOM. We welcome our viewers in the United States and around the world.

Hillary Clinton and Barack Obama know they're the top issues to you: the mortgage meltdown, recession fears, and higher prices for everyday things Americans need. So, both Democratic presidential candidates are using competing messages to pitch what they would do if elected. Today, they campaigned in Pennsylvania and reacted to the Bush administration's ambitious new proposal for overhauling the nation's financial system, all part of run-up to the vote in Pennsylvania just a few weeks before that state's big primary now.

Political correspondent Candy Crowley is in Harrisburg with the latest -- Candy.

CANDY CROWLEY, CNN SENIOR POLITICAL CORRESPONDENT: John, you know how campaigns are always saying it's time to get back to the issues important to voters? Well, today they did.

(BEGIN VIDEOTAPE)

CROWLEY (voice-over): Hillary Clinton and Barack Obama pushed their economic proposals through Pennsylvania with some new material -- the Bush administration plan to overhaul the financial regulatory system, which oversees everything from mega-banks to mortgage brokers.

SEN. BARACK OBAMA (D-IL), PRESIDENTIAL CANDIDATE: What you see is a handful of intelligent proposals for streamlining some of our regulatory systems, but a completely inadequate proposal to deal with the crisis that's going on right now. CROWLEY: She doesn't like it much either.

SEN. HILLARY RODHAM CLINTON (D-NY), PRESIDENTIAL CANDIDATE: they have announced a plan that comes late and falls short. No amount of rearranging the deck chairs can hide the fact that our housing and credit markets are in crisis.

CROWLEY: To win Pennsylvania by the margin she would like, Clinton needs a big turnout of working class traditional Democrats, the voting group which has formed the base of her primary wins. He needs to cut into that core to keep her from running up the score.

Both go after it the same way, with populist themes about the unfairness of an economy gone sour. The signs of distress quite literally on the streets of Harrisburg, Clinton detoured for a feel your pain moment with truckers slammed by fuel prices.

CLINTON: They can't afford to be on the road.

UNIDENTIFIED MALE: But it's -- and it's not just the drivers. It's the fishermen.

CLINTON: Right. Farmers.

UNIDENTIFIED MALE: Farmers.

CROWLEY: Campaigning in the heart of Lancaster, Obama blasted Countrywide Financial, a major distributor of subprime loans which engineered its own sale and then paid two of its executives multimillion-dollar bonuses.

OBAMA: So they get a $19 million bonus while people are at risk of losing their home. Now, what's wrong with this picture?

UNIDENTIFIED MALE: Everything.

OBAMA: Everything's wrong with it. But the problem...

CROWLEY: For the most part, they laid off each other Monday, opting instead for November's target.

CLINTON: Senator McCain recently gave a speech on the economy. And the best I could determine, his plan was not to have a plan. If he got the 3: 00 a. m. call on the economy, he would just let the phone ring and ring and ring.

(END VIDEOTAPE)

CROWLEY: All that public talk trying to push Hillary Clinton out of the campaign seems to have subsided for now. But, just in case, the Clinton campaign put out surrogates today to say it's just not going to happen -- John.

KING: Candy Crowley in Harrisburg there.

And more now on that proposal for a major overhaul in the way the U.S. financial system is regulated. Today, the treasury secretary, Henry Paulson, laid out the details. If enacted, it would become the biggest change to the financial system since the Great Depression. The plan would shift how the government regulates thousands of businesses from big banks to your local mortgage broker.

And among the changes, give the Federal Reserve more power, combine the agencies that oversee the financial markets, and create a new agency to regulate mortgage lending.

CNN senior correspondent Allan Chernoff in New York with more.

(BEGIN VIDEOTAPE)

ALLAN CHERNOFF, CNN SENIOR CORRESPONDENT (voice-over): Treasury Secretary Henry Paulson is trying to prevent crises like the one we have experienced in the past month, where millions of American homeowners are at risk of foreclosure and some consumers and companies are finding it tough to borrow money.

HENRY PAULSON, U.S. TREASURY SECRETARY: A strong financial system is vitally important -- not for Wall Street, not for bankers, but for working Americans. When our markets work, people throughout our economy benefit.

CHERNOFF: The blueprint calls for the Federal Reserve to become a supercop, with authority to watch over all players in the financial system, with the goal of maintaining stability.

A separate financial regulator would ensure the safety and soundness of banks and insurance companies. A Wall Street trade group calls the proposal very wise. But some veterans of past administrations fear, regulation may be no stricter than today.

LAWRENCE SUMMERS, FORMER TREASURY SECRETARY: Financial regulation shouldn't be about what's best for the financial sector, for banks, and investment banks, and mortgage brokers. It should be about what will cause the financial system to work best for American consumers and regular American businesses.

CHERNOFF: The blueprint also calls for investor and consumer protection to be handled by combining the agencies that oversee financial markets, the Securities and Exchange Commission and the Commodity Futures Trading Commission. Though the CFTC has been criticized for being soft on enforcement, the blueprint looks favorably on the commission's more hands-off approach to oversight, which worries consumer advocates.

TRAVIS PLUNKETT, LEGISLATIVE DIRECTOR, CONSUMER FEDERATION OF AMERICA: This plan is completely at odds with the current economic climate. And it has missed the lessons that we can learn now about how, if you don't regulate up front, you end up with bigger problems on the back end.

CHERNOFF (on camera): Keep in mind, the plan is only a blueprint that had been in the works for more than a year. It will be the subject of fierce debate before any changes are made in financial regulation.

Allan Chernoff, CNN, New York.

(END VIDEOTAPE)

KING: John McCain wants you to get to know him better. And he's hoping a biographical tour will help him add the title president to his political biography.

Today, the likely Republican nominee began the process of reintroducing himself to the public. McCain will travel to five states over the coming week.

Today's stop, Meridian, Mississippi.

And CNN's Dana Bash was there.

(BEGIN VIDEOTAPE)

DANA BASH, CNN CONGRESSIONAL CORRESPONDENT: John, Democrats are already trying to define John McCain as a 71-year-old creature of Washington who will just bring more of the same. But Democratic candidates are battling each other much more still than going after McCain. So, McCain advisers are hoping to take advantage of that this week and try to market their candidate the way they want.

(voice-over): John McCain opened a carefully-orchestrated weeklong journey through his life story with an emphasis on service, looking to turn his family history into a unique political brand.

SEN. JOHN MCCAIN (R-AZ), PRESIDENTIAL CANDIDATE: I'm the son and grandson of admirals. My grandfather was an aviator, my father a submariner. They were my first heroes.

BASH: He spoke in Meridian, Mississippi, near an airfield named for his grandfather, where the candidate himself served as a flight instructor before he headed to Vietnam and became a prisoner of war. Then his father commanded U.S. forces in the Pacific.

MCCAIN: My father seldom spoke of my captivity to anyone outside the family, and never in public. He prayed on his knees every night for my safe return. Yet, when duty required it, he gave the order for B-52s to bomb Hanoi in close proximity in the prison to which I lived.

BASH: On one level, these family stories taken from McCain's memoir Politics 101. Knowing a candidate's biography helps voters connect, especially when it appeals to patriotism. But it doesn't always work.

SEN. BOB DOLE (R), FORMER PRESIDENTIAL CANDIDATE: Well, there I was over in Italy in 1945, a young second lieutenant.

BASH: Bob Dole reluctantly played up his World War II experience and lost to someone who never served. Vietnam-veteran-turned- protester John Kerry touted his service as he objected to Iraq, but was also defeated.

But this candidate's biggest obstacle is convincing war-weary Americans to stay in Iraq. And advisers hope explaining his deep military roots will instill trust in his judgment.

MCCAIN: They gave their lives to their country and taught me lessons about honor, courage, duty, perseverance and leadership.

BASH (on camera): McCain made a sharp turn from talking about his family to giving his principles on the role of government in the lives of American families. He said government intervention should be limited to helping parents raise their children, but gave no specifics. Advisers insist, he's just laying a foundation now and promised policy proposals will come later -- John.

(END VIDEOTAPE) KING: Next stop for McCain, here in the Washington suburbs, where he went to high school.

Jack Cafferty joins us now with "The Cafferty File" -- Jack.

JACK CAFFERTY, CNN ANCHOR: John, thank you.

Here's a heartbreaking statistic to think about. We tout ourselves as the richest country in the world. The number of Americans receiving food stamps is projected to reach 28 million this year. "The New York Times" reports it's the highest level since the food stamp program began in the 1960s.

The number of recipients around the country who have near poverty level incomes that are necessary to qualify for food stamps staggering; 14 states have seen record increases in the number of people on food stamps just since last December, among them, Michigan where it's one in eight, West Virginia, one in six, Ohio, one in 10.

Of the 50 states, 40 saw their numbers rise, with several of them actually seeing increases of 10 percent or more. While the federal government is busy bailing out failing investment banks like Bear Stearns, an estimated two million people are looking at the possible loss of their homes through foreclosure.

Last month, the U.S. economy actually lost 63,000 jobs, while the cost of food is expected to about continue to go up four percent more this year. Average cost of a gallon of gasoline now $3.29, almost a dollar more than it was a year ago, with experts predicting $4 a gallon for gasoline this spring.

So, here's the question. What's the answer to a record 28 million Americans being on food stamps?

Go to CNN.com/caffertyfile, where you can post a comment on my blog.

That's pretty sad, John.

KING: Sad, indeed. Read that story this morning in the newspaper. All you could do is shake your head.

CAFFERTY: Yes, tough stuff.

KING: All right. Thanks, Jack.

Do the Democratic candidates find the prospect of making peace with Iran easier than making peace within the party?

(BEGIN VIDEO CLIP)

MARIO CUOMO (D), FORMER NEW YORK GOVERNOR: You would have thought that, if they could do it with Ahmadinejad, they could do it with one another.

(END VIDEO CLIP) KING: Former New York Governor Mario Cuomo is very worried about the Democrats' bitter battle. I will ask him why.

Hillary Clinton walks into the lion's den and disarms one of her toughest critics. The best political team on television will look at that one.

And Chelsea Clinton is once again asked about the impact of the Monica Lewinsky scandal on her mother. We will tell you how she answered.

(COMMERCIAL BREAK)

KING: As Hillary Clinton and Barack Obama swipe at each other, one Democrat says it could ruin the party's chances for winning in the fall. He says the Clinton-Obama spat sets up the Democrats for a potentially stunning political blow.

(BEGIN VIDEOTAPE)

KING: And the former governor of New York, Democrat Mario Cuomo, joins us now in THE SITUATION ROOM.

Governor, thanks for being with us today.

CUOMO: Thanks for having me.

KING: You write in this op-ed essay in The Boston Globe today you worry about the potential for a disaster for Democrats in November if this race does not come to a conclusion. That either the Clinton camp or the Obama camp would be so embittered by a long, drawn-out race, that a percentage of one camp might stay home, and therefore the Republican wins.

And you write in that essay: "Who can solve the problem? And you say, Obama and Clinton can by putting aside personal irritations and, to some extent, personals aspirations, and agreeing to end the hostilities and form a ticket that offers both of them, a candidate for president and a candidate for vice president, who's clearly good enough to serve as president, should the occasion arise."

But, sir, in that essay you don't say which one you think should be the presidential nominee and which would should be the vice presidential nominee. Why not?

CUOMO: That's right, John. I said something else too that you have left out that has proven to be more inviting to people.

I said, alternatively, if you can't get together and agree on who should be president, and who should be vice president -- and apparently you can't -- then at least you should do this to mollify the constituency of the person who loses, because we are losing votes against McCain every day. The constituencies are getting angry at the opposing candidate. That's the problem here.

So, how do you do it? You do it this way -- if you insist on fighting all the way through the convention on all the hairy questions that are going to come up, then do this: agree in advance that if you win, you win, and you're the candidate for the presidency. And your opponent becomes the candidate for the vice presidency. That would at the very least mollify some of the constituents of the person who does not succeed, whether it's Hillary or Obama.

Now, what am I after? Something very positive. The objective should be to defeat the Republicans. One of you is going to be defeated. But the object is to defeat the Republicans. And every day that's getting harder, because the polls show that people who voted for Obama would be reluctant, many of them, to vote for Hillary as presidential candidate. And vice versa.

And it's almost even, except I think the Obama people are less likely to vote for Hillary than the Hillary people for -- and I'm trying to help solve that problem, or at least reduce it. And agreeing that the loser becomes vice president might do that for you.

KING: But, sir, you have watched quite a few of these play out over the years. You thought about running once or twice yourself.

Do you really believe that an Obama voter or a Clinton voter now -- sure there'd be hard feelings now, but we're at the end of March heading to April. Do you really believe come November, that a significant number of Democrats are likely to vote Republican because their guy or their lady lost the nomination?

CUOMO: Well, you ought to read the comments to "The Baltimore Sun" blog today on this proposition. And they said things like this: I wouldn't vote for a ticket with Hillary on it whether she's the top or the second. . I wouldn't vote for McCain, but I wouldn't vote for her.

So, no, they wouldn't vote for McCain. They wouldn't vote for Bushism. They wouldn't vote for a continuance of the war. But they -- a lot of them -- could bring themselves not to vote for a person they have come to dislike because of the campaign.

Yes, I'm worried about it. The Pew poll shows it. All the polls show it. And I don't think they show an immediate turnaround when, miraculously, we get a winner and everybody who is with the loser says, OK, I changed my mind about Obama, I changed my mind about her, she's the presidential candidate.

The candidates will do that. The candidates will forget about it. they will be pragmatic. I don't believe the constituents will.

KING: But both of the campaigns say thanks but no thanks, Governor Cuomo.

CUOMO: No.

KING: We don't think it's time to focus on the vice presidential choice right now. How do you think you can get them -- to convince them to say, if I win I will pick the other one? CUOMO: No, John, they haven't said no to the alternate proposition. They haven't said no to, OK, the winner will win the presidency, or the nomination for the presidency, and the loser will -- they haven't said no to that. They haven't said yes to it, but they haven't said no to it.

What they have obviously said no to is, no, we're not going to be able to get together now and negotiate who should be on the top. That's a disappointment, especially since they both thought they could negotiate with Ahmadinejad, one of them, without even preconditions. You would have thought that if they could -- if they could do it with Ahmadinejad, they could do it with one another.

(END VIDEOTAPE)

KING: Former New York Governor Mario Cuomo a bit earlier today.

More on this issue a bit later with the best political team on television.

The final tab is in for the CIA leak probe, what it cost you to investigate the outing of CIA operative Valerie Plame Wilson.

Taking heat from lawmakers on both sides of the aisle, a member of the Bush Cabinet steps down. We will tell you what's behind the resignation.

(COMMERCIAL BREAK)

KING: Today, in the middle of a dramatic presidential contest, we want to take you back in time to a rare moment in presidential history.

It was 40 years ago today President Lyndon Johnson shocked many Americans by announcing he would not seek reelection. Since that time, many people have wondered why.

Here's part of what President Johnson said in his announcement.

(BEGIN VIDEO CLIP, MARCH 31, 1968)

LYNDON JOHNSON, PRESIDENT OF THE UNITED STATES: I do not believe that I should devote an hour or a day of my time to any personal partisan causes or to any duties other than the awesome duties of this office -- the presidency of your country.

Accordingly, I shall not seek, and I will not accept, the nomination of my party for another term as your president.

(END VIDEO CLIP)

KING: During that time, the Vietnam War was raging. President Johnson's approval ratings were very low. Some believe Johnson feared he would lose the election.

(NEWS BREAK) KING: Hillary Clinton might have won herself another supporter. But it's no ordinary voter. He was once considered part of that so- called vast right-wing conspiracy. Wait until you hear what he has to say about Senator Clinton now -- the best political team standing by.

Also, will they or won't they be seated? Regarding getting those Michigan delegates to the Democrats' convention, one congressman has an interesting proposal.

And Chelsea Clinton is again asked about something she has made clear something she won't discuss: how the Monica Lewinsky scandal played out in her family. Find out how the Clintons' daughter answered this time.

(COMMERCIAL BREAK)

KING: You're in THE SITUATION ROOM.

Happening now: It's the contest that has Democrats on edge. But they better hang on, because the Clinton/Obama battle isn't over by a long shot. We will show you what is next.

And if Clinton wins the nomination, what happens to the party then? Will Obama supporters rally around her, defect, or just sit out the general election?

Plus, he's a former archenemy of the Clintons who says he now has a very favorable impression of Hillary. Find out about what is behind this dramatic change of heart -- all this, plus the best political team on television.

Wolf Blitzer is off today. I'm John King. You're in THE SITUATION ROOM.

What the candidates say and when they say it can impact their standing in the Democratic presidential race. The Gallup daily tracking poll, for example, shows Barack Obama had dipped to 42 percent support before his March 18 speech on race. He has since regained 11 points. And on March 25, Senator Hillary Clinton told a Pittsburgh newspaper she misspoke when she said she landed in Bosnia under sniper fire during a visit there as first lady. At that point, she was at 46 percent. Since, she's dropped three points.

And with the primary season revving up again, Clinton and Obama are gearing up for the next run of contests.

CNN's Brian Todd joins us.

And, Brian, tell us, how do things appear to be shaping up?

BRIAN TODD, CNN CORRESPONDENT: Well, our polls indicate, John, that it may only get tighter from here on. Three weeks until Pennsylvania holds its primary, it's a state that Senator Clinton needs to win, and win big, but that is just the start.

(BEGIN VIDEOTAPE) CLINTON: With Pennsylvania's help, I believe I will be the Democratic nominee for president.

TODD (voice-over): And she just may get that help. Our new CNN Poll of Polls gives Hillary Clinton a comfortable lead in Pennsylvania. Indiana and North Carolina vote two weeks later.

OBAMA: Hello Greensboro.

TODD: Polls indicate Barack Obama leading in North Carolina, possibly because of the state's large African-American population and upscale voters. Indiana is more of a tossup. West Virginia votes one week later. It's a heavily rural state, which favors Clinton -- same story for Kentucky, which holds its primary one week after West Virginia.

Oregon votes the same day, but its affluent voters may side with Obama. June could see a split, with Puerto Rico leaning towards Clinton, and Montana and South Dakota toward Obama. Neither candidate is expected to finish the primary season with enough delegates to clinch the nomination, so it could come down to a decision by the superdelegates.

Clinton argues she's more electable because she can win the crucial battleground states in November.

CLINTON: And I don't think anybody doubts that a Democrat has to have a number of the big states anchored in order to put together the electoral votes needed to win. There's a generally accepted position that Ohio, Pennsylvania, and Florida are the critical swing states for Democrats.

TODD: Obama says that's so 2004. He says he can compete in states Republicans traditionally win -- like Missouri, North Carolina and Virginia. He wants...

OBAMA: To build a coalition for change that stretches through red states and blue states, because that's how we'll win in November.

TODD: So who's right?

WILLIAM SCHNEIDER, CNN SENIOR POLITICAL ANALYST: She says she'll win the big states, the Democrats have to win them. He says so can I. He says I can win a lot of the states the Democrats need to carry, but many of the ones he's won in the primaries are just hopeless for the Democrats in the fall.

TODD: And with polls showing hypothetical match-ups between McCain and Clinton and McCain and Obama basically a dead heat, just about every state could be crucial this November -- John.

KING: Just about.

Brian Todd.

Thank you very much. And so what if Hillary Clinton does win the nomination?

Will Obama supporters rally around her?

Joining us to talk about that and a whole lot more, CNN's senior analyst, Jeffrey Toobin, CNN's Jack Cafferty, both in New York. And here in Washington, CNN senior political analyst, Gloria Borger. All, of course, part of the best political team on television.

Let's start with the Hillary factor at the moment and let's break it down in pieces.

Jack, let me start with you and with this -- there's 10 contests left. If she wins Pennsylvania, let's say she can win six or seven of the last 10. Obama would likely still have a lead in pledged delegates but she would have momentum at the end.

Would the party then have to think he's limping, she's the winner?

CAFFERTY: Well, I don't know. I mean Nancy Pelosi has indicated that the superdelegates should tread very lightly if they're thinking about overturning the will of the people. Unless Hillary Clinton wins all of the remaining primaries and gets about 60 percent of the available votes in all of the remaining primaries, she's going to finish behind him in pledged delegates and she's going to finish behind him in the popular vote and she's going to finish behind him in number of states won.

If the superdelegates have the nerve to walk into that and give the nomination to somebody besides the guy who's in first place in those three categories, lots of luck.

KING: But, Gloria, what is the calculation at that point?

If you believe that Obama has been weakened or wounded at the end, but is still ahead in the cumulative count, what's the calculation for Democrats?

GLORIA BORGER, SENIOR POLITICAL ANALYST: I think then the superdelegates are really nervous. They're scared. They're all looking right now, John, for a tipping point to borrow from Malcolm Gladwell. They want to find that one place where they think OK, if she wins Pennsylvania, if she wins Indiana, if she wins North Carolina, even if she's not ahead in delegates, you can then make the case gee, maybe she's the more electable candidate -- to the superdelegates.

But, you know, John, as we've been saying all along, these are elected officials. They don't want to make this decision. They want the voters to make this decision. Because they could be in real trouble if they, for example, go against the way their states voted. So they'd rather stay out of it and have this decided before you get to a convention.

KING: And, so, Jeff, as we debate this who's right, Bill Clinton, when he says chill out and let it play out, or Mario Cuomo when he says whoa, this is a train headed for a disaster. Either some of Clinton's supporters will stay home or some of Obama's supporters will stay home -- or even worse, they could go and vote for the Republicans.

Do we know the answer to that question?

JEFFREY TOOBIN, CNN SENIOR LEGAL ANALYST: Well, I don't think we know the answer to what will happen in terms of the election. But I think we do know what will in terms of whether there's going to be some sort of settlement in the next few weeks. And the answer is, no. I mean Mario Cuomo can float his proposal, but Bill Clinton is right that this is going forward.

Hillary Clinton is obviously looking very good in Pennsylvania.

Is she really going to withdraw after winning in Pennsylvania?

Under what scenario is that likely?

And I think the Democrats are doomed or fated to go to the end of June, have all these primaries finish up and then have all the superdelegates make the decision. I think that's pretty much a done deal at this point.

BORGER: And I think part of Hillary Clinton's calculation is her future as a national party leader.

How much of that is she willing to jeopardize if she's behind in delegates but does win some of these states, but still is more than 100 behind in delegates to Barack Obama?

How much is she willing to tear the party apart?

And Obama, in his own way, has the same kind of a decision to make. Because, after all -- allegedly -- all the Democrats do want to win in November.

KING: But, Jack, you have all these people on the sidelines, whether they be Howard Dean, the chairman of the party, who somehow wants this to be resolved so that he's not blamed for a debacle. You have the supporters of either candidate. Some say she should stay in with supporters of Obama saying maybe she should get out. We don't have a crystal ball.

So, should they all just be quiet?

And how can we look past where we are?

CAFFERTY: I think if you look at the history of the last couple of elections in this country -- what happened in Florida 2000, what happened in Ohio in 2004 -- I think the public is very focused on the honesty of this process. And if they're convinced, at the end of the day, regardless of how many primaries we have, that it's been an honest process, then I think they'll be inclined to say, OK, you know, whatever the rules are, let's go forward. But if they suspect for a minute that somebody is jerking them around and that there are deals being made behind closed doors with a bunch of political types, then I think you're flirting with a convention that might look like Chicago in 1968.

KING: Well, so then is there anything more honest -- it's a flawed system, but is there anything more honest and more transparent to playing it out and letting people vote and telling all the superdelegates just get to sidelines and wait?

TOOBIN: I think that's the answer. That's what's going to happen. Everybody is going to vote. But I think a very important rhetorical battle that the Obama forces appear to have won is that pledged delegates equals the winner. That seems to be Nancy Pelosi's view, that seems to be the view of most superdelegates. So I think any result that overturns a lead in pledged delegates...

CAFFERTY: Yes.

BORGER: Well...

TOOBIN: ...which is very likely to be Obama's, is going to be very tough for people to stomach.

BORGER: But I think the Clinton campaign could pivot on a dime and say well, we've got -- if they somehow catch up to Barack Obama in the popular vote -- and that doesn't look likely because of Michigan and Florida now -- they could pivot and say, well, this is about the popular vote, it's not about the delegates. I mean I still think...

TOOBIN: Sure, they can say that...

BORGER: Right. Right.

TOOBIN: But I mean will anybody believe them?

CAFFERTY: But that's not what it's about.

BORGER: And they will.

CAFFERTY: It's about delegates. That's -- those are the rules of the primaries.

BORGER: Right. Right. But I'm just saying we've heard all these arguments now, even including, OK, it's about what states you could win in the Electoral College, right, so?

You know, they're going to throw anything out there that they can. This is really hard-fought.

KING: I'm going to throw a time-out at the moment. Stand by for just one second.

When we come back, rethinking Hillary Clinton -- a face-to-face meeting leaves a conservative critic with a very different impression. Find out why he's having a change of heart. Plus, we'll show you the message John McCain wants you to take away from his new Web ad.

Stay right there.

You're in THE SITUATION ROOM.

(COMMERCIAL BREAK)

KING: A former Clinton enemy comes face-to-face with Hillary and walks away with what he calls a very favorable impression.

We're back with the best political team on television -- CNN senior analyst, Jeffrey Toobin; CNN's Jack Cafferty and CNN senior analyst Gloria Borger.

You know, I covered, ladies and gentlemen, back in the days of the Clinton White House, when Richard Mellon Scaife, the publisher in Pittsburgh, gave "The American Spectator" a ton of money to go out and look for Clinton dirt, if you will, to dig up things in the Clintons' background -- part of what she called then the vast right-wing conspiracy. Well, she went in to do an editorial meeting with his newspaper, he showed up and he says this about her.

He says: "She walked into the conference room. She showed a great deal of political courage to come." and he goes on to say: "Senator Clinton also exhibited an impressive command of many of today's most pressing domestic and international issues. Her answers were thoughtful, well-stated and often dead on."

He goes on to say he agrees with her a lot. Not sure he will endorse her, but has a great deal of respect for her now.

Jack, that's a turnaround.

(LAUGHTER)

CAFFERTY: Did he ask her about Bosnia?

(LAUGHTER)

KING: I'll read while you tell me whether you think this is a big deal.

CAFFERTY: I don't know if it's a big deal.

KING: I don't see Bosnia in here.

CAFFERTY: I mean, you know, people change their minds every day. The guy writes -- publishes a newspaper in Pennsylvania. They're going to have an election there in a couple of weeks. Fine. I -- you know, I don't think -- I don't think it's going to move the Earth, but it's interesting.

KING: Jack -- Jeff, I'm sorry -- people change their mind every day, but this is a guy who was funding and a very public critic of both Bill and Hillary Clinton funding an effort that many thought was an effort to find ways to get them.

TOOBIN: Oh, and a really sinister act. I mean I wrote a -- I wrote a book about all this. And I mean I think, you know, what Scaife did was deeply dishonest and unfair to the Clintons.

And that newspaper, you know, the "Pittsburgh Tribune Review" is not a real newspaper in the sense that the Pittsburgh "Post Gazette" is a newspaper. I mean it is a fringe element. And I am surprised she even talked to them. And I think he's a nut...

BORGER: Well...

TOOBIN: And who -- I don't really think anyone really cares what he thinks.

CAFFERTY: Yes.

BORGER: Well, let's talk about Hillary Clinton going into the lion's den, though. You know, I give her an awful lot of credit. I think she said it was counterintuitive. Well, it was counter-intuitive for her to go in there. It's clear she really wants to win Pennsylvania, that's for sure.

And she walked right in there. And, of course, Scaife is against the war, so he probably agrees with Hillary on Iraq now. But I give her credit for walking in there and sitting down with those folks for more than an hour and talking to them about the issues, knowing full well that he was not inclined to even like her, much less support her candidacy, which he has not done.

CAFFERTY: Well, how much...

(CROSSTALK)

CAFFERTY: How much downside was there going in?

He didn't like her anyway.

BORGER: Yes, but...

CAFFERTY: So the worst that could happen is he still wouldn't like her.

(LAUGHTER)

CAFFERTY: But the best that could happen is what happened. He might say, hey, you know what...

BORGER: Exactly.

CAFFERTY: So I mean...

BORGER: Smart.

CAFFERTY: ...there, it, you know -- she had everything to gain and really not much to lose. KING: All right, let's...

BORGER: Smart (INAUDIBLE).

KING: ...let's move on to a guy that's got a lot of time on his hands and the debate is whether he's doing the right thing with that time, and that is John McCain. He's going to be the Republican candidate. The Democrats are in this dog eat dog duel.

John McCain is on this biography tour. Today it was in Meridian, Mississippi. He'll be in D.C. suburbs tomorrow. He's trying to every day introduce to people some eliminate of his life and then try to connect why that biography matters to his campaign and what he says he would do if elected president.

I want you to listen first to a piece of a Web ad. They're also putting up a new Web ad every day. They say it takes us inside John McCain's life.

Let's listen.

(BEGIN VIDEO CLIP FROM JOHN MCCAIN FOR PRESIDENT CAMPAIGN AD)

UNIDENTIFIED MALE: The son and grandson of admirals. His grandfather an aviator. His father a submariner. They were his first heroes. And earning their respect has been one of the lasting ambitions of his life. They gave their lives to their country and taught young John McCain lessons about honor, courage, duty, perseverance and leadership.

(END VIDEO CLIP)

KING: Hard to argue with anything there. It's a bio about his family's military service and his military service. But, as you all know, politics is about contrasts. When you say something about yourself, you're not only trying to say something about yourself, you're often trying to draw a contrast with somebody else.

Is there a hidden or not so hidden message here about the Democrats?

CAFFERTY: I think that we have to look at this in the context that John McCain's been in the United States Senate since 1986, was elected in Congress in 1982, ran for president in the year 2000. He is a bona fide, legitimate American hero. He deserves all of our admiration and respect for everything he's done for this country.

That said, this economy is in a recession. There are two million people who might lose their homes. The government -- which means you and me and Gloria and Jeff and John -- are bailing out Bear Stearns to keep it from collapsing. We lost 63,000 jobs last month.

Tell me what you're going to do to fix my problems and the problems that are going to accrue to my children and grandchildren instead of asking me to look at your family album. And I say that with all due respect. But this is generic caca. (LAUGHTER)

CAFFERTY: We need to talk about fixing the stuff that's broken. And that's not in that message. And that's what I want to hear.

KING: I can't wait to see how they spell that in the transcript.

(LAUGHTER)

KING: But, Jeff, as you know, there are some liberal bloggers who think by saying the American president, Americans are waiting for him, by this play to patriotism that somehow John McCain is trying to raise questions about the patriotism or the American credentials, even, of Barack Obama and Hillary Clinton.

Do you buy that?

TOOBIN: I do a little bit. And not that ad, but a different ad that talks about, you know, the American that Americans have been waiting for. But, you know, I think a curious fact about American politics in recent years is that war heroes have done badly. George McGovern, the great bomber pilot during World War II, he lost. Bob Dole, you know, injured terribly in Italy during World War II. He lost. John Kerry, who had served with such great distinction in Vietnam, he lost.

I don't think voters, as much as they admire war heroes, count a lot -- have that count much in their calculations.

BORGER: But, you know, this is a way of introducing the American public to John McCain's character. That's going to be central to his campaign. Because as we saw in all these primaries that we all -- that we all covered, people seem to think John McCain is a leader. They like who he is. They like the fact that he's independent. And if you're trying to appeal to these Independent voters -- and that's exactly what he's doing -- he's trying to say to them this is my history, this is my background, I've served and this tells you something about my character.

There'll be installment two, three and four and five to this.

KING: It's installment two for us tomorrow. I need to call a time out right here.

(LAUGHTER)

KING: Jeff, Jack and Gloria, thank you very much.

Time out from here.

We ran a little long. My fault there.

Lou Dobbs is getting ready for his show right at the top of the hour -- Lou, we'll get to you on time, I promise.

What are you working on? LOU DOBBS, HOST, "LOU DOBBS TONIGHT": Thank you very much, John.

Coming up at 7:00 p. M. Eastern here on CNN, more signs of media bias against Senator Clinton. The drumbeat for her to quit intensifies. That drumbeat, by the way, emanating from the Obama camp.

And just how far is the mainstream media going this time?

Have they bought in hook, line and sinker?

The answer is, unequivocally, yes. We'll have the latest for you from the campaign trail.

Also, the Bush administration announces the biggest overhaul of Wall Street regulations in generations -- or so it says.

But is that true?

We'll have a special report.

And new evidence tonight that the federal government and our food industry failing to keep unsafe foods out of the hands of American consumers.

And Nobel Prize winning economist and best-selling author, Joseph Stiglitz, will be among my guests. He says the time to act is now if we're to save the economy.

Join us for all of that at the top of the hour here on CNN, all the day's news and much more -- John, back to you.

KING: See you in a few minutes, Lou.

Thank you.

DOBBS: Yes.

KING: Twenty-eight million Americans now on food stamps.

What's the answer to that disturbing new record?

Jack Cafferty is back with your e-mail in just a moment.

And what to do about Michigan's delegates?

We'll have details of an unusual new proposal.

Stay with us.

You're in THE SITUATION ROOM.

(COMMERCIAL BREAK)

KING: In today's Political Ticker, one Congressman offers a new idea for awarding Michigan's delegates. Based on the January primary results and partly on the popular vote in all the presidential primaries. Bart Stupak proposed that in a letter to the Democratic Party today. It would give Hillary Clinton 47 delegates, Obama 36. The remaining delegates would be handed out based on the percentage of the popular vote after the final primary.

For the second time in as many weeks, Chelsea Clinton is asked about the impact of the Monica Lewinsky scandal on her mother. Her answer remains the same -- none of your business.

A student at a North Carolina state university today argued that since Bill Clinton was president at the time, it is the public's business.

(BEGIN VIDEO CLIP, COURTESY WCNC)

CHELSEA CLINTON: Well, sir, I respectfully disagree. I think that is something that is personal to my family. I'm sure there are things that are personal to your family that you don't think are anyone else's business, either.

(APPLAUSE)

C. CLINTON: But, also, on a larger point, I don't think you should vote for or against my mother because of my father. OK. OK. You know, I'm really...

(CROSSTALK)

C. CLINTON: Oh. OK.

(LAUGHTER)

(END VIDEO CLIP)

KING: You see the questioner leaving there and laughing. He's not laughing at Chelsea Clinton. The audience was laughing because the man explained he said had to get to class.

Jack Cafferty joins us again -- Jack.

CAFFERTY: I wonder what sort of a class he was in a hurry to get to.

Here's the question this hour -- what's the answer to a record 28 million Americans being on food stamps?

Harold writes from Anchorage, Alaska: "America needs jobs -- good jobs. While Bush is bailing out big business, the middle class is left to lick up the tinkle down economics. Perhaps a 21st century version of the CCC public works program is in order. Help out the people, rebuild our disintegrate infrastructure. We'd better do something soon, while we still have a country left to save." Cookie in South Dakota: "What a sad day for our country -- 28 million need assistance to eat. We need to bring our troops home, stop illegal immigration and stop all aid to all countries and take care of our own people. Bring back our jobs, no buying anything from China, add tariffs to all products made elsewhere that are brought into this country. That would be a good start. Everybody needs to buy American products to bring more jobs to our people."

Bob writes: "How about more manufacturing jobs? I lost my job last year because we could no longer compete against offshore production and the wages -- or lower prices they offer. In my job search, I've seen a significant amount of age discrimination. Being over 50 and unemployed is a scary place to be.

Jack writes: "The first question I would ask is how many of those 28 million are in this country illegally? They must go."

And David says: "Simple. Quit spending millions and billions in Iraq, bring your troops home to help rebuild your failing infrastructure, have your brave men and women in uniform spend their well-earned money in their home state and their home country."

The 28 million, by the way, John, is an estimate of how many will be on food stamps by the end of this calendar year, 2008.

KING: Both stunning and sad.

CAFFERTY: Yes, it really is.

KING: A campaign issue, we hope.

CAFFERTY: Well, issued be.

KING: Jack Cafferty...

CAFFERTY: Yes. Absolutely.

KING: It should be. We'll see if they get to that among their many, many issues. But that one is a hard one to ignore.

Thanks, Jack.

Barack Obama goes bowling for votes and ends up in the gutter.

CNN's Jeanne Moos find it Moost Unusual.

(COMMERCIAL BREAK)

KING: You might say Barack Obama is taking aim in a new way to connect with voters. And CNN's Jeanne Moos finds it Moost Unusual.

MOOS: ...at the Pleasant Valley Bowling Lanes. But it was most pleasant for the press, writing snarky headlines like "Spare Us" and "Obama's Striking Bowling Blunder."

In seven frames, he bowled a measly 37. Somebody give that candidate one of those kiddy bowling ramps. When he finally got a spare...

(VIDEO CLIP)

MOOS: ...it sparks a chant.

OBAMA: Yes, I can (INAUDIBLE).

MOOS: Such are the perils of candidates that are just like us -- campaigning, connecting with voters by eating hot dogs and drinking beer, bottle feeding a calf.

That experience led the eloquent Obama to rhapsodize...

OBAMA: She chowed that sucker down.

MOOS: But at least the senator was spared from wearing what the herd wore -- not the herd of cows, the herd of press -- forced to wear plastic booties so they wouldn't track in germs that might hurt the cows.

How did the candidate avoid looking like a HAZMAT worker in his germ-free footwear?

OBAMA: I bought some new shoes and got them out of the carton.

MOOS: The shoes the senator should have given the boot to were the size 12 bowling shoes, though it did inspire what became the quotation of the day: "My economic plan is better than my bowling."

So is his basketball.

(VIDEO CLIP)

MOOS: Some praised his bad bowling: "Good. I'd hate to elect a president that was good at bowling." Notice the attached photo of a former president. And good bowlers have gotten knocked out of the race like so many pins.

Go ahead and criticize: "Good God, he bowls like a ninny."

(on camera): Yes, well, Obama may bowl like a ninny, but at least he didn't get booed.

(BEGIN VIDEO CLIP, COURTESY ESPN)

UNIDENTIFIED MALE: The president of the United States.

(BOOS)

(END VIDEO CLIP)

MOOS: ESPN mikes picked up raucous booing as President Bush threw out the first pitch at Washington, D.C. 's new stadium, though there was a murmur of approval...

(VIDEO CLIP)

MOOS: ...at the president's relatively strong pitch.

And so what if bowling isn't right up Senator Obama's alley?

As he used body language to will the ball in the right direction, we were bowled over by the Obama gutter step.

(VIDEO CLIP)

MOOS: Jeanne Moos, CNN, New York.

(END VIDEO TAPE)

KING: Once it leaves your hand, none of those other moves really do much with the ball there.

You've helped make our political podcast one of the most popular on iTunes. Check it out all the time at CNNPolitics.com.

"LOU DOBBS TONIGHT" is next -- Lou.

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